🐻On Bubbles, Cycles, and Bears🐻

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To Operators,

Bitcoin blows past $50,000. A historical moment and it’s certainly been blowing minds everywhere. Just ask CNBC’s Andy Sorkin:

Mind. Blown. As with any rise in Bitcoin, the bears and naysayers are crawling out of their dark holes to shout “bubble” in the face of a revolution, silly bears 🐻.

Does Bitcoin experience cyclical bubbles? Yes. Are we currently in one? Yes. Is it over? No.

Let’s take a look…

The entire cryptosphere revolves around Bitcoin’s halving cycle. Every 210,000 blocks mined, or roughly ~4 years, the mining reward (what miners get paid to “operate” the network) is cut in half. Miners are paid in bitcoin for mining a block. In Bitcoin’s history there have been 3 halvings with the most recent occurring in May of 2020.

The supply of new bitcoin comes entirely from the miners and anyone who’s taken economics 101 can start to put together the supply/demand picture here…

Holding demand constant if supply is slashed in half every 4 years that should push price upwards. If demand is also growing that should create exponential growth in price. So does it?

Two’s coincidence, three’s a pattern. Looking at growth post halving we can see that:

  • After the 1st halving Bitcoin went from $10 to $1,100 – 110x

  • After the 2nd halving Bitcoin went from $600 to $18,500 – 30x

  • After the 3rd halving Bitcoin has gone from $9000 to $51,000 – 6x

Cycles are important for Bitcoin, and within each 4 year halving cycle is a bull/bear cycle as well:

Immediately after a halving event Bitcoin enters it’s bull phase which on average lasts roughly 1.5 years. Following this, Bitcoin enters it’s bear phase which on average lasts 2.5 years.

The bear phase usually begins around year-end, which means it may be triggered by investors cashing out high multiple gains timing tax season.

As of writing this, it’s been 282 days since the last halving or 0.8 years – which would imply that this bull cycle is only about half over.

Timing shows we’re likely not at a top yet, so what about price?

I’m not a big fan of using price models to set targets, but one of my favorite on-chain analysts, Willy Woo, has used his models with stunning accuracy in the past.

Willy’s price model suggests our next top will occur around the $100,000 level. Another popular model, Stock-to-Flow, which essentially models Bitcoin in a resource framework, suggests a top in the $100k-$300k range.

The upper end of this range would represent an overheated bull run which could certainly be possible given the level of institutional buying and generally poor macro conditions for fiat currencies.

These are both pressures Bitcoin hasn’t felt in any previous bull market.


Bitcoin’s bull run (or if you work for CNBC, bubble) isn’t done yet, in fact it’s just getting started. Based on leading models, this up cycle should terminate at the end of 2021 or when Bitcoin stalls out in the $100k-$300k range.

What about altcoins? Bitcoin at $100k means ~$2T in market cap (20% of gold’s market cap). A sizable portion of this will certainly be pushed down to alts, and as I talked about in the past, that much capital will be rocket fuel for the relatively skinny altcoin market.

Forward and upward.

The Portfolio Rundown

Another blockbuster week from the portfolio. Notable movers are Chainlink and Cardano as they continue to eat Bitcoin’s portfolio share.

LINK has largely lagged the rest of the altcoin market which has been curious. As the leader of the DeFi market in terms of market cap, I’d expect a bit more action here but I’m mostly chalking this up to investors skipping LINK for more direct DeFi coins like UNI, YFI, and AVAX. Chainlink did some catching up in the last few days and I expect this to continue as DeFi grows.

ADA is moving up ahead of the Goguen launch slated for March. This will bring smart contracts to Cardano and represents a big step in the fight against Ethereum. Charles Hoskinson (Cardano’s founder) has recently been seen taking shots at Ethereum’s spike in gas prices. Nice Charles.

The gas spike is big news and something we’ve seen in the past with the explosion of DeFi and CryptoKitties (yes CryptoKitties actually brought Ethereum to it’s knees in 2018). One of Cardano’s main value props is that they’ve built in scalability to ensure gas spikes, slow downs, and failed transactions don’t happen.

Be careful when you DeFi kids, you’ll shoot your eye out.

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Nothing in this email is intended to serve as financial advice. Do your own research.

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